Nigeria dips into oil funds as Jonathan takes charge

Nigeria’s acting president approved the release of $2 billion in windfall oil savings to government on Friday, a further sign the country is emerging from paralysis caused by the absence of its ailing leader.

The decision to release the money comes three days after Vice President Goodluck Jonathan assumed executive powers to fill a vacuum left by President Umaru Yar’Adua, who has been in hospital in Saudi Arabia since late November.

The United States and Britain commended Nigeria, which endured several decades of military rule until elections in 1999, for maintaining democratic principles with the handover.

But Nigerians see Jonathan as a caretaker leader and expect uncertainty to continue as rival political factions jockey for position ahead of presidential elections due in 2011.

The $2 billion of oil savings will be shared by the three tiers of government — including the powerful governors of 36 states who publicly backed the handover of powers to Jonathan.

“It is a stabilisation move that you need to do to keep the states and government from getting restless,” said Bismarck Rewane, head of Lagos-based consultancy Financial Derivatives.

“Once the money has flowed through there will be a semblance of stability as against the atmosphere of high instability which prevailed before,” he told Reuters.

But the step also shows that while Jonathan may be able to exert authority over the cabinet as acting leader, he has less power in the face of the state governors, who will play a key role in picking presidential nominees for next year’s polls.

The OPEC member’s excess crude account, where it saves any oil revenue above a benchmark price, was a pillar of IMF-backed reforms meant to help hedge sub-Saharan Africa’s second-biggest economy against volatile world energy prices.

But under Yar’Adua Nigeria regularly dipped into the savings, leading some analysts to warn economic reforms were at risk unless the cash-hungry governors could be kept at bay.

Minister of State for Finance Remi Babalola said recently the account had dwindled from over $20 billion in 2007, the year Yar’Adua took office, to around $6.2 billion on spending to counter the impact of a global downturn.

That was before the latest distribution of funds.



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